Hawaiian and AirTran Buying ATA Pieces

[storminpilot]

http://news.ft.com/cms/s/eb5a996c-2621-11d9-81d9-00000e2511c8.html

ATA on brink of bankruptcy
By Caroline Daniel
Published: October 25 2004 03:00 | Last updated: October 25 2004 03:00

The problems facing even US low-cost airlines will be underlined this week with the potential bankruptcy of ATA, which could come as soon as Monday, and a warning from Independence Air on Wednesday about its deteriorating financial position.

According to a person familiar with the filing, ATA, the tenth largest airline in the US could file for bankruptcy today in Indianapolis. Its financial distress has already attracted a number of interested parties.

Discussions involving AirTran are currently the most advanced. It is interested in ATA's operations at Midway airport in Chicago, and may seek to wet-lease its 737 Boeing aircraft. It could file a separate plan with the bankruptcy court, alongside the ATA filing.

AirTran has also been holding talks with Hawaiian Airlines, which is understood to be interested in taking over ATA's Hawaiian routes, which use 757 aircraft and are based on the West Coast and Phoenix, according to someone familiar with the talks.

Those routes were also of interest to America West, which has also sought to consolidate the low-cost sector, and currently has a central hub in Phoenix. However, it could re-emerge as a potential bidder for ATA once the airline files for bankruptcy.

Southwest, which currently dominates Midway airport, could also emerge as a bidder.

Cerberus, a private-equity group, which has also invested in Air Canada, has held discussions with ATA about providing debtor-in- possession financing to fund a bankruptcy.

It could provide $35m in initial cash, and up to a further $40m in funding if the carrier meets certain performance targets. Discussions about the DIP were ongoing at the weekend.

ATA is not the only airline to discover that low costs are not enough to protect it from the current high fuel environment and brutal domestic competition. Independence Air, which reinvented itself from a regional airline this year, has seen its cash balances erode fast, and reported several months in which its planes have been less than half full. Its board is expected to meet today to discuss the airline's problems, and on Wednesday the carrier will report its results.

One senior private-equity executive said he expected the airline to run out of cash by February.

 

[FLYNAKD]

There is supposed to be an announcement at 15:30 in IND according to a local IND T.V. station. I'm in the crew room at MDW as we speak and planes are still pushing off the gates. Gotta be an optimist!

 

[storminpilot]

http://www.indystar.com/articles/5/189172-3665-092.html

ATA may be close to filing bankruptcy


By Ted Evanoff
[email protected]
October 25, 2004


ATA Airlines Inc. named its top financial executive to the new position of chief restructuring officer as the Indianapolis carrier appeared closer Monday to filing for Chapter 11 bankruptcy protection, possibly as early as Tuesday.

The nation's No. 10 airline reassigned Chief Financial Officer Gilbert Viets to a job where he could renegotiate debt payments and bargain with carriers aiming to buy the airline, its jets or its biggest gem, the gates at Midway International Airport in Chicago.

ATA appears ready to set off a bidding contest for the Midway gates and other lucrative pieces of the airline among discount carriers America West of Tempe, Ariz., and AirTran Airways of Orlando, Fla., industry analysts and pilots' union official Erik Engdahl said Monday.

Rocked by fare wars with rivals and record prices for aviation fuel, ATA is coping with an ill-fated expansion that has drained cash and moved the airline closer to bankruptcy.

Filing under Chapter 11 of the federal bankruptcy code would postpone debt payments while ATA drafts a reorganization plan to repay creditors.

"I suspect it will be filed (Tuesday)," said attorney Alan Mills, of the Indianapolis law firm Barnes & Thornburg, which represents a firm that has leased aircraft to ATA.

Mills declined to name the client but said Monday night that an unfolding deal appears to have AirTran in position to make the first offer for the Midway gates. America West will probably emerge with a counter offer, possibly for the entire airline.

AirTran wants control of the Midway hub to lessen its dependence on operations in Atlanta, where its largest hub faces a fare war with dominant carrier Delta Airlines.

America West appears more interested in acquiring the entire 7,700-employee ATA to give it more heft to take on major rivals such as American Airlines and discount carrier Southwest Airlines.

"AirTran is in a better position financially than America West to work out a deal with ATA," said airline analyst Russell Wodiska of Eclat Consulting of Reston, Va., economic adviser to the Association of Flight Attendants.

AirTran did not return calls Monday. America West and ATA officials separately said the airlines would not respond publicly to speculation in the market.

If ATA does file for bankruptcy, it would set in motion several weeks of negotiations between Viets and ATA creditors and potential suitors.

"By the end of the year, we should have a pretty good idea of where things are going" at ATA, Mills said.

Among the options:

• A merger with America West could preserve many ATA routes and jobs under the name of the Arizona airline. But the head office in Indianapolis, where ATA employs about 2,300, could lose an undetermined number of jobs as work is consolidated in Tempe.

• Selling the Midway gates to AirTran would gut a lucrative piece of the airline and could set in motion the dismantling of ATA, which accounts for 39 percent of Midway's passenger traffic.

• ATA could spin off its expensive new jets and the Midway hub, returning to its roots as an Indianapolis charter service.

ATA is on pace to lose more than $90 million this year and has warned it will fall short next year in the first quarter on lease payments due on new airliners. Payments on those new aircraft are scheduled to exceed $500 million over the next two years.

Late Monday afternoon, ATA said that Viets had taken the position of chief restructuring officer on Oct. 19. A retired managing partner in the Indianapolis office of the now defunct accounting firm Arthur Andersen, Viets had been a member of the ATA board of directors when he was pressed into active duty in June as chief financial officer.

Viets served four months as CFO, replacing David Wing, who had left ATA as chief financial officer last summer. Wing has been reemployed in the same position at an annual salary of $315,000 and a signing bonus of $157,500, ATA told investors Monday in a filing with the U.S. Securities and Exchange Commission.

Viets took on the new job as the Air Line Pilots Association unit at ATA prepared for a second request for salary concessions and concluded informal merger talks with union counterparts at America West.

Talks with the America West pilots were aimed at sorting out seniority issues in case ATA is acquired by the Arizona company, said Erik Engdahl, president of the ATA pilots' union.

Pilots expect ATA will file for Chapter 11 bankruptcy reorganization, possibly Tuesday, and then touch off a bidding war to drive up the value of its gates at Midway, Engdahl said.

"There's something going on but it's very quiet," Engdahl said. ''I think ATA wants to go in (to bankruptcy) with something like a prenuptial with someone else who will merge with them and give them the extra cash they need to continue operating."

Members of the pilots' union completed a poll Saturday on their web site asking if in the second round of concessions they would prefer to change work rules, reduce salaries or both. The results should be tallied by Friday, Engdahl said.

A similar phone poll of 315 of the 1,038 pilots in early October found the majority favored taking both actions, Engdahl said.

The pilots had earlier agreed to give back $43 million worth of compensation over two years. Engdahl said he expects ATA will disclose the amount it is seeking in the second round by mid November.

By that time, the airline will have completed its third-quarter financial report and will have a clearer understanding of its finances, Engdahl said.

The flight attendants' union recently approved $24 million worth of concessions.

"ATA's financial problems are not unique to ATA," Wodiska said. "They are standard problems that are affecting all airlines."

But ATA has said its cash -- $150 million on June 30 -- could be exhausted early next year. That could cripple the airline in the face of competition with larger rivals.

"They don't have the same kind of warchest to fend off competitors' attacks," Wodiska said, "and weather what has become a problem for the entire industry, high fuel prices"

Founded in 1973 in Indianapolis as American Trans Air, ATA has no ties to AirTran, an Orlando low-fare carrier once known as ValueJet.

The Indianapolis carrier, long a military charter service, now flies more than 8 million military and regular passengers every year. It accounts for a quarter of the passenger traffic at Indianapolis International Airport.

ATA vaulted into the ranks of prominent regular carriers in 1992 when it branched from Indianapolis and began flying to Midway. When Chicago completed a $225 million expansion of Midway in 2001, ATA was ready with a new and larger fleet of jets for its hub.

The airline had ordered 49 Boeing 737 and Boeing 757 airliners scheduled for delivery between 2000 and 2003. But even as the planes came into the ATA fleet, fuel prices soared by triple digit rates and fare wars drove down ticket prices. ATA now receives 7.14 cents of revenue for every mile it flies a passenger, but spends 7.30 cents per seat mile, forcing it into red ink.

 

[RJP]

Someone posted this on the airliners.net forums. Hmmmm.

With ATA rumored to be selling HA their Hawaiian operations one would assume that some 757's would be included in the deal. I know that when they were looking at merging with AQ they were talking about acquiring the 757. With that real possibility emerging what do you see as possible new routes for these aircraft? They already fly to all the same citys TZ flys to from Hawaii so adding flights to those cities make since but not as many as TZ operates now I am sure (thus increasing their loads on their existing flights). Perhaps switching the 757 to higher frequency trips on popular routes as LAX and SFO then taking the 767-300's off for more long range flying...perhaps introducing ORD or NYC?!

 

[Boeingman]

Someone posted this on the airliners.net forums. Hmmmm.

With ATA rumored to be selling HA their Hawaiian operations one would assume that some 757's would be included in the deal. I know that when they were looking at merging with AQ they were talking about acquiring the 757. With that real possibility emerging what do you see as possible new routes for these aircraft? They already fly to all the same citys TZ flys to from Hawaii so adding flights to those cities make since but not as many as TZ operates now I am sure (thus increasing their loads on their existing flights). Perhaps switching the 757 to higher frequency trips on popular routes as LAX and SFO then taking the 767-300's off for more long range flying...perhaps introducing ORD or NYC?!

Are ATA's 75's ETOPS equipped?

 

[Pickle]

180 ETOPS even

Boeingman asked: "Are ATA's 75's ETOPS equipped?"

Yes, they are. In fact, ATA was the first to get 180 ETOPS for the 757.

At any rate, all the -200s and the -300s are 180 ETOPS.

 

[Erndogg]

Someone posted this on the airliners.net forums. Hmmmm.

With ATA rumored to be selling HA their Hawaiian operations one would assume that some 757's would be included in the deal. I know that when they were looking at merging with AQ they were talking about acquiring the 757. With that real possibility emerging what do you see as possible new routes for these aircraft? They already fly to all the same citys TZ flys to from Hawaii so adding flights to those cities make since but not as many as TZ operates now I am sure (thus increasing their loads on their existing flights). Perhaps switching the 757 to higher frequency trips on popular routes as LAX and SFO then taking the 767-300's off for more long range flying...perhaps introducing ORD or NYC?!

Our CEO has been looking at 757's . Possible routes OGG-SAN, PDX-OGG, SEA-OGG possibly more. They want to free up the 767 for HNL-BWI/JFK, HNL-HKG, HNL-Shanghai etc...
It looks like AWA wants to go at it on their own in PHX. Possibly LAS-HNL. SEA,SFO, and LAX (Charter)-HNL could go to HA
HA has been looking at more 767's but the delays associated with BK have made it hard to acquire additional A/C.
Will just have to sit back and se how this unfolds???